MGETR60120 - Museums and Galleries Exhibition Tax Relief; eligible expenditure; non-core expenditure

S1218ZCD Corporation Tax Act 2009

Museums and Galleries Exhibition Tax Relief (MGETR) in respect of a separate exhibition trade by a Museums and Galleries Exhibition Production Company (MGEPC) is only available on elements of core expenditure (MGETR60010).

Not all expenditure is core expenditure. Some elements of expenditure will not be core expenditure because they relate to the running of the exhibition.

Expenditure on marketing or advertising an exhibition is not production expenditure and is therefore not core expenditure and will not qualify for MGETR. This would include the costs of producing promotional material or events for the exhibition.

Expenditure incurred on activities not directly involved in producing the exhibition, for instance finance or legal costs, will still be included in the taxable profits and losses of the production. It is simply not eligible for MGETR.

Furlough payments, including those met by the Government through the Coronavirus Job Retention Scheme (CJRS)

Expenditure is only included in the separate exhibition trade if it has been incurred by the company on the activities involved in developing, producing, running, deinstalling or closing the exhibition, as per s1218ZBC(1). To qualify for an additional deduction, expenditure must also meet the definition of ‘core’ in s1218ZDC: it must be on the activities involved in producing, deinstalling or closing the exhibition at a relevant venue.

When a company places an employee on furlough, the employee must cease work. The employee is not carrying out the activities listed above and is not working on producing the exhibition.

Staffing costs in respect of an employee on furlough are therefore not considered by HMRC to be incurred on producing the exhibition and do not constitute production expenditure. Such payments are not considered to be costs of the separate exhibition trade and are not eligible for tax relief. This applies equally to all furlough payments, whether or not they are reimbursed by the CJRS, and includes any ‘top-up’ element. If an employee has been placed on flexible furlough, then any payment in respect of the furloughed time will not be eligible.

Holiday pay and sick pay are statutory requirements. HMRC considers them to be a necessary cost of employing staff and part of the cost of their working time. Any period during furlough which is taken as annual leave or recorded as sick leave is potentially eligible for relief, and should be apportioned in line with work done.